Most states have a method by which tax debtors are allowed to offer the State an amount less than the amount due on tax debts. The rules vary state by state but they all require a financial analysis similar to the process a tax debtor would go through when filing for a compromise with the federal government.
For Michigan taxpayers however, there is no such luck. Unfortunately in the State of Michigan, tax debtors are allowed to enter into an installment agreement over the course of no more than 24 months. How a taxpayer sets up this installment agreement can have an effect on a Federal Installment Agreement, or Federal Offer in Compromise.
A very concise statement on the Michigan position on Offer in Compromise can be found at http://www.michigan.gov/taxes/0,4676,7-238-43808-154194--F,00.html
Taxpayers who find they may qualify for a Federal Offer in Compromise are more often than not better served by entering into an installment agreement with the State first. On their Federal offer they are then able to place the monthly installment agreement payments on the financial information statement that will be submitted to the Federal Government.
That being said, a complete financial analysis should be done before entering into the installment agreement with the State. Many national tax firms treat state taxes as a secondary consideration, but it's important to create one strategy for both the Federal and State taxes due. Quite often, the State will file a tax lien before the IRS gets to filing theirs and a taxpayer resolving only their Federal issue is still left with a tax lien and no game plan for tackling their State tax problem.
At Michigan Tax Resolution, we promise to give you a game plan that will solve your entire tax problem both Federal and State. If you've found yourself in the collections cross-hairs of either of these two tax collection agencies we're here to help.
Feel free to contact us any time for a free no obligation consultation either over the phone or in person.
To a brighter tax future,
Randy Clark
michigantaxproblems.com
586 248-6008

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